Learning to appreciate I.T.

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Shared services initiatives not only reduce inefficiencies and cut
costs, but can also teach users to see IT as a valuable resource
instead of a commodity there for the taking.

In too many organisations, the IT department exists as an
island, staffed by people who are technically savvy but often fail
to successfully communicate with the rest of the business.
Inevitably, gulfs arise between users expectations and the IT
shops ability to meet them as it contends with limited
resources and spiraling demands.

Delegates to a recent roundtable in New Delhi, India agreed that
shared services-generally defined as the aggregation and
standardisation of backroom IT functions and processes across
departments or business units-has the potential to bridge the
business-IT gap.

In a successful shared services model, the IT department acts
and is seen much like an independent service provider, bound to
users through service level agreements (SLAs) that lay out what
they can expect, and what it is the departments duty to
provide, for all to see.

Kick-starting a transformation But a host of issues must be
confronted on any organisations road to put this model in
place. According to T. Gopinath, regional director, enterprise
infrastructure practice, consulting and integration, Asia, at
technology solutions provider Hewlett-Packard, implementing a
comprehensive shared services programme requires a fundamental
change in the way IT is regarded, by end-users and the IT shop
itself.

"Over time, the shared services model is being viewed from a
higher level," Gopinath says. "Were seeing that learning in
terms of processes can occur across segments-for example, some of
the best processes for banks are actually coming from the marketing
space.

We may look at shared services from an IT perspective, in terms
of the data centre or applications, but the key thing is really
what the processes are and how you train people to do them. We have
to take shared services to the next level of process to get the
best practices from it, so we have to get out of the IT mindset and
look at other things, then come back to IT."

Any shared services initiative also requires a transformation on
the part of CIOs, who as part of a drive centralising and
standardising IT functions-and defining these functions in terms of
metrics and business value-will have to come to know the wider
organisation intimately, and persuade others of the merits of any
transformation they institute.

"You need to re-look how you measure a lot of things," Gopinath
explains. "Some of the more successful CIOs that Ive seen
have actually become advisers to the CEO."

"You are the gatekeeper for new technology inside the company.
So if you think that technology will benefit the organisation, you
have to go back to the board, put the seed in and get the
investment," adds Rajesh Batra, general manager of IT for pipe
manufacturer Jindal Saw, who has embarked on several shared
services initiatives in his career. "As you write reports you have
to market yourself as well; you have to sell users the benefits of
any project you bring in."

But shared services projects can be so broad in scope that they
leave many IT executives with the question: where to begin? After
all, some applications appear nearly impossible to package or
commoditise.

"In any organisation, there are various applications which
different users depend on-how do you package these existing
services into shared services?" asks SK Sharma, vice-president,
systems, for public sector firm Engineering Projects (India). "How
do you address the issue of accounting applications, or any other
critical applications? This requires a very significant investment
in IT."

A cautious approach
Gopinaths recommendation is to take things one careful step
at a time. "From an overall application perspective, we suggest a
four-step process-simplify, standardise, modularise and then
integrate," he says. "Whether simplifying or standardising comes
first depends on the organisations case."

"Youve got to establish the standard processes that you
can pick up from a system and that are valid as of today, and set
up a framework to manage them," Gopinath adds. "(The framework) may
not be based on IT from day one-it can actually be on paper."

If they evaluate their existing systems critically, most IT
directors will find clear instances of duplication among their
finance, human resources or customer relationship management (CRM)
applications, and a shared services programme can start with an
attempt to streamline or eliminate these redundant processes,
Gopinath notes.

The respect IT deserves While promoting efficiency and cutting
back on waste have their appeal, the real lure of shared services
of many IT executives is that it seems to promise their department
some appropriate respect. When processes are standardised and can
be sold to internal users, the real value of IT becomes
apparent.

"There are certain intrinsic benefits with (shared services),"
says D. Banerjee, assistant general manager, systems, at
diversified producer DCM Shriram Industries. "Continuity is
something which you can associate with this kind of partnership.
Youre bringing healthy competition into the organisation;
since each department is now a profit centre, slackness wont
be there once you start charging for IT services under the standard
model."

"(Shared services) will definitely remove a lot of the
inefficiencies and casualness from your organisation," adds Vivek
Khanna, general manager of IT and finance at electrical equipment
manufacturer Havells India. "What usually happens is that
finance or other departments will give you their requirements. But
when youve met a requirement, and spent so much time
fulfilling it, youll be disturbed to see theyre not
using the service. That happens a lot."

It seems clear that passing some of the costs of IT on to
internal users can trim expenses by encouraging them to use
services more judiciously - but getting users to accept such a
policy, especially when theyve been conditioned to see IT as
an inexhaustible well, is no easy task.

Engineering Projects Sharma points out its not only
a matter of introducing a policy, but effecting a profound cultural
change, especially in a public sector organisation such as his.

"The biggest organisations in the public sector dont
really have those kinds of concepts, like profit centres or doing a
costing of certain services," he says. "The overall scenario is not
focussed on monetary users or shareholder results."

Banerjee of DCM Shriram notes chargeback attempts are likely to
prompt users to ask the IT department some awkward questions.

"What we have seen is that whenever we talk in terms of charging
a particular department for usage, they ask Why should I take
your services? There are other services out there," he says.
"It becomes very difficult to justify as often there are also no
benchmarking processes."

Introducing a chargeback scheme also depends on all departments
within an organisation being genuinely profit-driven, says Khanna.
"Before chargeback, all departments should be profit centres,
otherwise the users will say All right, charge me anything
you wish, because it is not going to hurt me - but give me 100 per
cent uptime, thats your responsibility," he explains.
"Only then will chargeback work."

Winning users over
According to Hewlett-Packards Gopinath, much of the user
resistance a shared services programme may spark can be softened by
savvy "marketing" on the part of the CIO, and an emphasis on quick,
easily perceptible returns.

"Both cost savings and service excellence are needed from a
shared services programme, but from what Ive seen in many
cases, service excellence can be felt more easily," he says.

"You can make a very positive impact immediately thats
noticed by the CFO, the CEO and the whole organisation," he
adds.

Another alternative, according to Jindal Saws Batra, is to
tone down the aims of a shared services effort. Simply recouping
the IT departments expenses may be a more realistic goal than
transforming it into a revenue generator.

"If I institute a chargeback, its not going to work - the
user will say its the same company thats paying my
salary and their salary," he says. "Its not about making
money, just sharing costs."

At one of the firms Batra worked for, IT was positioned as
"non-profit, non-loss" operation.

"The kind of chargeback we did was just to cover our expenses;
it was a cost-sharing model rather than payback," he says.

"If I was to get up there and say Ill have a chargeback
for all of the services I provide, that may not work. But if you
look at the bigger picture, at your total costs and how you can
charge some of them back to users, that just might," he adds.

Get it in writing At the heart of any winning shared services
strategy, according to Gopinath and Batra, are the SLAs binding the
IT department to end-users. Formulating these contracts carefully
to clearly spell out the expectations and obligations of both sides
significantly increases the chances of success.

"It takes three or four months to draw up a final SLA," Batra
says. "Ill go through how soon e-mail, internally and
externally, will be delivered, what kind of applications support I
provide - the whole nine yards will be listed, including turnaround
time."

CIOs must also avoid making promises theyre not certain
they can keep, he adds.

"I can only sign an SLA that I can honour. The users may want
100 per cent on everything, but I cant say well provide
99 per cent because I dont get that from the service
providers. I cant provide a service unless its being
provided to me."

The IT department must be equally frank to users, Batra says,
about anticipated failures.

In a disaster scenario, "we tell them up front we will not be
meeting SLAs for a period of time," he says. "You have to be
transparent, you cant hide. I have to be very clear about the
companies and costs involved, and if they think they can do a
better job, then give them the chance to do it."

Gopinath agrees that "theres no point signing up to
something you cant fulfill."

"Whats normally successful is a broad-level agreement that
specifies how fast youll attend to a request and then fulfill
it. Some metrics have to be in there which you know you can
manage," he says.

But Manoj Srivastava, head of IT at Sahara Airlines, says an SLA
stacked with numbers and percentages can be a recipe for
trouble.

"Most of the time you cant define the SLA in terms of
numbers," he says, "But if you define SLAs in terms of soft skills,
it will definitely work.

"Most of the time people are fighting about percentages, but it
should really be the total umbrella of trust that goes down in that
piece of paper. Communication is very important ... but
unfortunately, nobody will bring up an SLA until a dispute
arises."

"The user should feel like the IT person is taking care of them
and is concerned with their problems," Khanna says. "Then the users
will be ready to pay and do everything else. But the SLA should
also say exactly what the user is expected to do."

Gopinath notes that it is also important that the dialogue
between the IT department and users doesnt end when the SLA
is reached. "Its all a question of relationships; these
things are part and parcel of any contract," he says. "You
cant just sign a contract at the beginning of the year and
forget about the entire thing then come back at the end of the year
to renew it. You need to have constant contact and communication
with the user."

We're all in this together
As with any large-scale transformation, when it comes to shared
services, delegates say, IT simply cant do it alone.

"Its not just IT," Batra says. "There are three things
that make a project successful: people, processes and technology.
Technology is the easier piece. Its people and processes that
make the difference."

"The expectation from the old-school perspective is that IT will
provide whatever is required," says Gopinath. "But weve seen
IT can only do so much. There are a lot of people, processes and
user organisations that have to take over wherever the IT concern
lands. Ultimately, its about working with everybody and
managing perceptions."

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1123957989981-smh.com.auhttp://www.smh.com.au/news/management-focus/learning-to-appreciate-it/2005/08/15/1123957989981.htmlsmh.com.auMIS Asia2005-08-12Learning to appreciate I.T.Jonathan HopfnerShared services initiatives not only reduce inefficiencies and cut
costs, but can also teach users to see IT as a valuable resource
instead of a commodity there for the taking.TechnologyManagementFocus